Despite years of promises to crack down on tax evasion, in particular the failure to prevent model under the Criminal Finances Act 2017, Chancellor Rachel Reeves is finally getting serious about companies and advisers who promote tax evasion. A series of measures announced on 26 March 2025 will see new criminal and civil penalties for breach of DOTAS, much broader enforcement of stop notices which will also apply to banks, and a curtailing of legal privilege for promotion of tax avoidance schemes.
A stronger DOTAS is not the only arrow in the government’s anti-tax evasion quiver. Measures were also announced to increase charging decisions for fraud by 20%, allow for direct recovery of tax debt from individuals and companies, alongside a new rewards model for informants who blow the whistle on offshore tax schemes, with the rewards linked to a percentage of tax recovered. All in all, a serious shift towards closing the tax gap, with the burden falling primarily on tax advisers, law firms, and financial services.
Increased liability for law firms and legal professionals
Law firms that provide legal opinions supporting tax avoidance schemes will face heightened scrutiny. The government’s plan to curtail legal professional privilege in cases where legal advice is used to market tax schemes marks a fundamental shift in regulatory oversight. This means that barristers and solicitors who might have traditionally provided legal cover for aggressive tax planning could now see their names publicly listed and their advice subject to HMRC scrutiny.
Moreover, the introduction of new criminal offences targeting those who facilitate avoidance schemes means that legal professionals could face prosecution if they are found to have played a significant role in enabling tax evasion. The potential waiving of legal privilege could also lead to increased litigation risk, as clients may attempt to hold legal professionals accountable for advice that later results in financial penalties.
Stricter regulations for accountants and tax advisers
Accountants and tax advisers will bear a significant share of the regulatory burden under the new measures. The expansion of the Disclosure of Tax Avoidance Schemes (DOTAS) regime will require tax advisers to report a broader range of schemes, including those involving disguised remuneration arrangements.
The introduction of harsher penalties for non-compliance, including possible personal liability for directors and senior advisers, will fundamentally alter the risk landscape for professionals in the sector. Those who fail to disclose tax schemes properly or continue to advise on arrangements deemed abusive could face severe financial penalties or even criminal charges.
HMRC’s increased information-gathering powers mean that tax professionals will have fewer opportunities to shield client arrangements from scrutiny. The consultation’s proposal to impose joint and several liability on tax advisers for unpaid penalties may lead to increased professional indemnity insurance costs and discourage firms from offering aggressive tax planning services altogether.
Impact on banks and financial institutions
Banks and financial institutions will also be significantly affected by the reforms, particularly through the expansion of stop notices. Under the proposed Universal Stop Notice regime, banks could be prohibited from facilitating transactions linked to tax avoidance schemes and required to report suspicious activity to HMRC.
Failure to comply with these new obligations could result in substantial fines or restrictions on their ability to operate certain financial services. Moreover, banks may need to overhaul their internal compliance procedures to ensure that they are not inadvertently assisting clients engaged in tax evasion, leading to higher operational costs and increased regulatory burdens.
Tackling economic crime head-on
The Chancellor’s statement is part of a long-running crackdown on tax evasion which is ramping up in recent years. HMRC has intensified investigations into firms engaged in aggressive tax planning, particularly those facilitating offshore tax avoidance schemes. High-net-worth individuals and corporations utilising complex financial structures have faced heightened scrutiny, resulting in penalties amounting to millions of pounds.
The involvement of major accountancy firms in tax avoidance has also come under significant regulatory focus. Firms such as KPMG and EY have faced fines and legal action for designing and promoting questionable tax strategies. In some instances, individual partners have been held personally liable for providing misleading tax advice, demonstrating that accountability is extending beyond corporate entities to the professionals involved.
Beyond traditional tax evasion cases, financial institutions have found themselves at the centre of enforcement actions. The Danske Bank money laundering scandal, though primarily focused on financial crime, exposed how inadequate oversight of cross-border transactions can facilitate tax evasion on a massive scale. This case serves as a stark warning that regulatory scrutiny extends to the financial infrastructure enabling illicit tax practices.
Additionally, the UK’s corporate criminal offence (CCO) for failing to prevent tax evasion is being actively enforced. HMRC has pursued organisations that lack adequate procedures to prevent tax fraud by employees or clients. The enforcement of the CCO underscores the necessity for companies to implement robust compliance frameworks, as failing to do so can result in significant fines and reputational damage.
The future of tax advisory services
The government’s crackdown signals a clear intention to end the profitability of tax avoidance schemes and hold enablers accountable. In response, law firms, tax advisers, and financial institutions may need to pivot towards more conservative tax planning strategies, focusing on compliance rather than aggressive tax reduction techniques.
Firms operating in this space will need to invest in compliance training and legal risk assessment to ensure that they are not inadvertently breaching the new regulations. The introduction of a specialist HMRC task force dedicated to enforcing these rules means that businesses can expect more frequent investigations and audits, requiring a proactive approach to risk management.
While the consultation remains open, it is evident that the government is determined to follow through with these measures. Those operating in the tax advisory sector must prepare for a landscape in which tax avoidance is not only discouraged but actively prosecuted, marking the most significant shift in tax enforcement policy in recent history.
